[Federal Register Volume 88, Number 222 (Monday, November 20, 2023)]
[Notices]
[Pages 80786-80788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25542]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98925; File No. SR-MRX-2023-20]


Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change to Amend MRX 
Options 7, Section 5 To Amend Route-Out Fees

November 14, 2023.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 1, 2023, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I and II below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's Pricing Schedule at 
Options 7, Section 5, Other Options Fees and Rebates.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/mrx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
Pricing Schedule at Options 7, Section 5, Other Options Fees and 
Rebates. Specifically, the Exchange proposes to amend Part A, Route-Out 
Fees. The Routing Fees apply to executions of orders that are routed to 
one or more exchanges in connection with the Options Order Protection 
and Locked/Crossed Market Plan.
    Today, the Exchange assesses all Members a $0.55 per contract Penny 
Symbol Routing Fee and a $1.09 Non-Penny Symbol Routing Fee to route to 
another options exchange. The Exchange proposes to instead assess a 
$0.60 per contract Penny Symbol Routing Fee and a $1.20 Non-Penny 
Symbol Routing Fee to route to another options exchange regardless of 
the capacity of the order. The purpose of the proposed Routing Fees is 
to recoup costs incurred by the Exchange when routing orders to other 
options exchanges on behalf of options Members. In determining its 
proposed Routing Fees, the Exchange took into account transaction fees 
assessed by other options exchanges, the Exchange's projected clearing 
costs, and the projected administrative, regulatory, and technical 
costs associated with routing orders to other options exchanges. The 
Exchange will continue to use its affiliated broker-dealer, Nasdaq 
Execution Services, to route orders to other options exchanges. Routing 
services offered by the Exchange are completely optional and market 
participants can readily select between various providers of routing 
services, including other exchanges and broker-dealers. Also, the 
Exchange notes that market participants may elect to mark their orders 
as ``Do Not Route'' to avoid any Routing Fees.\3\ The proposed 
structure for Routing Fees is similar to another options market.\4\ The 
Exchange believes that the proposed Routing Fees would enable the 
Exchange to recover the costs it incurs to route orders to away markets 
after taking into account the other costs associated with routing 
orders to other options exchanges.
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    \3\ See Supplementary Material .04 to MRX Options 3, Section 7.
    \4\ See MEMX's Options Fee Schedule at https://info.memxtrading.com/us-options-trading-resources/us-options-fee-schedule/. MEMX assesses a $0.60 per contract Penny Symbol routing 
fee and a $1.20 Non-Penny Symbol routing fee.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\5\ in general, and furthers the objectives of sections 
6(b)(4) and 6(b)(5) of the Act,\6\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among members and issuers and other persons using any facility, 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposed changes to its Routing Fees are reasonable 
in several respects. As a threshold matter, the Exchange is subject to 
significant competitive forces in the market for options securities 
transaction services that constrain its pricing determinations in that 
market. The fact that this market is competitive has long been 
recognized by the courts. In NetCoalition v. Securities and Exchange 
Commission, the D.C. Circuit stated as follows: ``[n]o one disputes 
that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .'' \7\
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    \7\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission

[[Page 80787]]

highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \8\
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    \8\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options security transaction services. The Exchange is only one of 
seventeen options exchanges to which market participants may direct 
their order flow. Within this environment, market participants can 
freely and often do shift their order flow among the Exchange and 
competing venues in response to changes in their respective pricing 
schedules. As such, the proposal represents a reasonable attempt by the 
Exchange to increase its liquidity and market.
    The Exchange's proposal to amend its Routing Fees such that all 
Members would pay a $0.60 per contract Penny Symbol Routing Fee and a 
$1.20 Non-Penny Symbol Routing Fee to route to another options exchange 
is reasonable because the proposed Routing Fees would enable the 
Exchange to recover the costs it incurs to route orders to away markets 
after taking into account the other costs associated with routing 
orders to other options exchanges. Routing services offered by the 
Exchange are completely optional and market participants can readily 
select between various providers of routing services, including other 
exchanges and broker-dealers. Also, the Exchange notes that market 
participants may elect to mark their orders as ``Do Not Route'' to 
avoid any Routing Fees.\9\ The proposed structure for Routing Fees is 
similar to another options market.\10\
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    \9\ See Supplementary Material .04 to MRX Options 3, Section 7.
    \10\ See MEMX's Options Fee Schedule at https://info.memxtrading.com/us-options-trading-resources/us-options-fee-schedule/. MEMX assesses a $0.60 per contract Penny Symbol routing 
fee and a $1.20 Non-Penny Symbol routing fee.
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    The Exchange's proposal to amend its Routing Fees such that all 
Members would pay a $0.60 per contract Penny Symbol Routing Fee and a 
$1.20 Non-Penny Symbol Routing Fee to route to another options exchange 
is equitable and not unfairly discriminatory because these Routing Fees 
will apply equally to all options Members.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
    In terms of intra-market competition, the Exchange's proposal to 
amend its Routing Fees such that all Members would pay a $0.60 per 
contract Penny Symbol Routing Fee and a $1.20 Non-Penny Symbol Routing 
Fee to route to another options exchange does not impose an undue 
burden on competition because these fees will apply equally to all 
options Members.
    In terms of inter-market competition, the Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
options exchanges. Because competitors are free to modify their own 
fees in response, and because market participants may readily adjust 
their order routing practices, the Exchange believes that the degree to 
which fee changes in this market may impose any burden on competition 
is extremely limited.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A)(ii) of the Act \11\ and Rule 19b-4(f)(2) \12\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is: (i) necessary or 
appropriate in the public interest; (ii) for the protection of 
investors; or (iii) otherwise in furtherance of the purposes of the 
Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7d0f081118501e1210101813090e3d0e181e531a120b"><span class="__cf_email__" data-cfemail="1260677e773f717d7f7f777c6661526177713c757d64">[email protected]</span></a>. Please include 
file number SR-MRX-2023-20 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-MRX-2023-20. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-MRX-2023-20 and should be 
submitted on or before December 11, 2023.


[[Page 80788]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25542 Filed 11-17-23; 8:45 am]
BILLING CODE 8011-01-P


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